DCIT., Central Circle-4, Hyderabad V. M/s Jaycee Sponge Profiles Private Limited, Hyderabad

ITA 1517/HYD/2014

• Counselvise Citation: 151722514 RSA 2014
• Duration Of Justice: 1 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 24-09-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 25-09-2014
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: KISHORE KUMAR KABRA
• Keywords: Unexplained investment; Search and seizure; Additional evidence
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NOS. 1515, 1516 & 1517/HYD/2014 ASSESSMENT YEARS: 2004-05, 2005-06 & 2006-07 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, HYDERABAD VS M/S. JAYCEE SPONGE PROFILES PVT. LTD., HYDERABAD [PAN: AABCJ4624P] (APPELLANT) (RESPONDENT) C.O. NOS. 75, 76 & 77/HYD/2014 (IN ITA NOS. 1515, 1516 & 1517/HYD/14) ASSESSMENT YEARS: 2004-05, 2005-06 & 2006-07 M/S. JAYCEE SPONGE PROFILES PVT. LTD., HYDERABAD [PAN: AABCJ4624P] VS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, HYDERABAD (CROSS-OBJECTOR) (RESPONDENT) FOR REVENUE : SHRI RAMA KRISHNA, BANDI, DR FOR ASSESSEE : SHRI KISHORE KUMAR KABRA, AR DATE OF HEARING : 24-09-2015 DATE OF PRONOUNCEMENT : 09-10-2015 O R D E R PER BENCH : THE APPEALS ARE BY REVENUE AND CROSS-OBJECTIONS ARE BY ASSESSEE AGAINST THE ORDERS OF THE COMMISSIONER OF IN COME TAX (APPEALS)-VI, HYDERABAD DT. 30-05-2014. REVENUE IS AGGRIEVED AND I.T.A. NOS. 1515, 1516 & 1517/HYD/14 C.O. NOS. 75, 76 & 77/HYD/14 M/S. JAYCEE SPONGE PROFILES PVT. LTD., :- 2 -: RAISED COMMON GROUNDS IN ALL THE YEARS. FOR THE SAK E OF RECORD, THE GROUNDS RAISED IN AY. 2004-05 ARE EXTRACTED AS UN DER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITI ON MADE ON ACCOUNT OF UNDISCLOSED INVESTMENT, UNEXPLAINED LOAN S AND UNEXPLAINED SHARE APPLICATION MONEY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE CIT(A) ERRED IN ADMITTING ADDITIONAL EV IDENCE FILED BY THE ASSESSEE IN CONTRAVENTION OF R.46A. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW, THE CIT(A) ERRED IN FOLLOWING THE DECISION IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD VS. DCIT 137 ITD 287 (MUM.) SB TO HOLD THAT NO ADDITION CAN BE MADE IN THE UNABATE D ASSESSMENTS U/S. 153A IN THE ABSENCE OF INCRIMINATI NG MATERIAL FOUND DURING THE COURSE OF SEARCH. 4. ON THE FACTS OF THE CASE, CIT(A) IS NOT CORRECT IN RELYING ON THE DECISION OF ALL CARGO LOGISTICS LTD., SINCE IN THE PRESENT CASE NO ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143( 3). 5. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSIN G OFFICER BE RESTORED. 2. IN AY. 2005-06 & 2006-07, THE GROUNDS ARE SIMILAR TO GROUND NO.1, 3 4 AND 5, WHEREAS GROUND NO.2 DOES NO T ARISE IN OTHER ASSESSMENT YEARS. THE COMMON ISSUE IN THESE YEA RS PERTAIN TO UNEXPLAINED SHARE APPLICATION MONEY AND UNEXPLAIN ED LOANS. ASSESSEE RAISED CROSS-OBJECTIONS WHICH ARE SIMILAR I N NATURE AND GROUNDS RAISED IN THE CROSS-OBJECTIONS ARE AS UNDER: (A) IN ASSESSMENTS THAT ARE ABATED, THE ASSESSING OFFICER RETAINS THE ORIGINAL JURISDICTION AS WELL A S JURISDICTION CONFERRED ON HIM UNDER SECTION 153A FOR WHICH ASSES SMENTS SHALL BE MADE FOR EACH OF THE SIX ASSESSMENT YEARS SEPARATELY. (B) IN OTHER CASES, IN ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT U/S. 153A WIL L BE I.T.A. NOS. 1515, 1516 & 1517/HYD/14 C.O. NOS. 75, 76 & 77/HYD/14 M/S. JAYCEE SPONGE PROFILES PVT. LTD., :- 3 -: MADE ON THE BASIS OF INCRIMINATING MATERIAL, WHICH IN THE CONTEXT OF RELEVANT PROVISIONS MEANS (I) BOOKS OF ACCOUNT, OTHER DOCUMENTS, FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT, AND (II) UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE CO URSE OF SEARCH. 3. WE HAVE HEARD THE LD. DR AND LD. COUNSEL IN DETAIL . NEITHER PARTY PLACED ANY PAPER BOOK ON RECORD SO AS TO EXAMI NE THE CONTENTIONS. 4. BRIEFLY STATED, ASSESSEE IS A PRIVATE LIMITED COMPAN Y AND IS ENGAGED IN THE MANUFACTURING OF SPONGE IRON. THERE WAS A SEARCH AND SEIZURE OPERATIONS U/S. 132 OF THE INCOME TAX ACT [ACT] CONDUCTED ON 29-01-2009 ALONG WITH ANOTHER GROUP COM PANY OF SUNDER STEEL CASES. ASSESSEE WAS ISSUED NOTICE U/S. 153A AND IN RESPONSE, ASSESSEE FILED RETURNS OF INCOME BY ADMITTIN G NIL INCOME. IN THE COURSE OF PROCEEDINGS U/S. 153A, ASS ESSING OFFICER (AO) IN ALL THE YEARS EXAMINED THE SHARE APPLICATION MONEY AND UNSECURED LOANS RECEIVED AND IN THE ABSENCE OF DETAIL S, THE SAID AMOUNTS WERE BROUGHT TO TAX IN RESPECTIVE ASSESSMENT YEA RS. THUS, IN ALL THE IMPUGNED ASSESSMENT YEARS, THE ASSESSMENTS W ERE COMPLETED TREATING THE UNSECURED LOANS, SHARE APPLICATI ON MONEY RECEIVED WAS TREATED AS INCOME. 5. APART FROM THE ABOVE, ANOTHER ISSUE IN AY. 2004-0 5 IS WITH REFERENCE TO UNEXPLAINED INVESTMENT IN PURCHASE OF LAN D ON WHICH AN AMOUNT OF RS. 2,60,000/- WAS ADDED BUT DELETED BY LD.CIT(A). REVENUE HAS RAISED GROUND NO.2 THAT CIT(A) ERRED IN ADMITTING ADDITIONAL EVIDENCE FILED BY ASSESSEE IN CONTRAVENTION OF RULE 46A. REVENUE IS NOT CONTESTING THE MERITS OF THE ISSUE. BRIEF LY STATED, DURING THE YEAR, ASSESSEE PURCHASED LAND AT ANTHIREDD Y GUDA I.T.A. NOS. 1515, 1516 & 1517/HYD/14 C.O. NOS. 75, 76 & 77/HYD/14 M/S. JAYCEE SPONGE PROFILES PVT. LTD., :- 4 -: VILLAGE, KOTHUR MANDAL, MAHABOOBNAGAR DISTRICT FOR A SUM OF RS. 12,60,000/- AS PER AGREEMENT OF SALE. THE SAME WAS REGISTERED FOR A SUM OF RS. 6 LAKHS AND ASSESSEE ACCOUNTED THE SAME IN THE BOOKS OF ACCOUNT. IN THE COURSE OF SEARCH AND SEIZUR E OPERATIONS, ASSESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE IN SALE CONSIDERATION OF RS. 6,60,000/-. ASSESSEE ADMITTED RS. 4 LAKHS TOWA RDS UNDISCLOSED PAYMENT MADE FOR PURCHASE OF LAND. AO B ROUGHT THE BALANCE RS. 2,60,000/- AS UNEXPLAINED INVESTMENT. 5.1. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE AG REEMENT OF SALE WAS ENTERED BY THE THEN PROMOTERS OF THE COMPANY O N 30-06- 2003 AND SALE DEED WAS EXECUTED ON 4 TH AUGUST, 2003 AFTER INCORPORATION OF THE COMPANY ON 16 TH JULY, 2003. THE THEN PROMOTERS OF THE COMPANY EXECUTED THE AGREEMENT OF SALE PRIOR TO INCORPORATION FOR PURCHASE OF CERTAIN LANDS ON BEHALF OF THE COMPANY FOR RS. 12,60,000/- AND PAID A SUM OF RS. 2 LAKHS AT THE TIME OF EXECUTION OF AGREEMENT WHICH WAS BEFORE THE DA TE OF INCORPORATION. SINCE THE ADVANCE OF RS. 2 LAKHS WAS PAID PRIOR TO INCORPORATION OF COMPANY, COMPANY IS NOT RESPONSIBLE FOR THE INVESTMENT. SUBSEQUENTLY, THE SELLER EXECUTED ONE RECEI PT DT. 4 TH AUGUST, 2003 STATING THAT THEY HAD RECEIVED SUMS AGGREG ATING TO RS. 6 LAKHS TILL 4 TH AUGUST, 2003 AND THEY HAVE TO RECEIVE A FURTHER SUM OF RS. 6 LAKHS ONLY. COMPANY HOWEVER, ADMITTED I NCOME OF RS. 4 LAKHS PRESUMING THAT PREVIOUS PROMOTERS HAD PAI D THE ADMITTED SUM OF RS. 4 LAKHS AFTER THE FORMATION OF COMPA NY SO THAT ASSESSMENT CAN BE CLOSED AND PROTRACTED LEGAL PROCE EDINGS CAN BE AVOIDED, EVEN THOUGH SAID SUM WAS NOT THE INCO ME OF THE COMPANY. IT WAS CONTENDED THAT AGREEMENT OF SALE WAS E XECUTED BY THE PROMOTERS BEFORE THE FORMATION OF THE COMPANY. THEREFORE, I.T.A. NOS. 1515, 1516 & 1517/HYD/14 C.O. NOS. 75, 76 & 77/HYD/14 M/S. JAYCEE SPONGE PROFILES PVT. LTD., :- 5 -: THE ABOVE CANNOT BE BROUGHT TO TAX IN THE HANDS OF ASSE SSEE- COMPANY. 5.2. LD. CIT(A) ACCEPTING THE ABOVE CONTENTIONS, DEL ETED THE AMOUNT BY STATING AS UNDER: 5.3 PERUSED THE OBSERVATIONS OF THE ASSESSING OFF ICER AND THE SUBMISSIONS OF THE APPELLANT. AS COULD BE SEEN FROM THE FACTS OF THE CASE THE PROPERTY UNDER REFERENCE WAS PURCHASED FOR RS. 12,60,000/- AND REGISTERED FOR RS . 6.00 LACS, WITH A SUM OF RS. 4,00,000/- WAS ADMITTED BY THE APPELLANT, AS UNEXPLAINED INVESTMENT, THOUGH IT WAS PAID BY THE PREVIOUS PROMOTERS AND THE FAILURE OF THE ASSES SEE TO PRODUCE THE DETAILS FOR THE PAYMENT OF RS. 2,60,000 /- RESULTED IN THE FURTHER ADDITION. AS COULD BE SEEN FROM THE FACTS BROUGHT ON RECORD, THE APPELLANT IS RIGHT IN CONTEN DING THAT THE COMPANY WAS NOT IN EXISTENCE AT THE TIME OF EXECUTI ON OF THE AGREEMENT AND THE AGREEMENT MADE ON BEHALF OF NON-E XISTING COMPANY IS NULL AND VOID AND THE COMPANY IS NOT BOU ND BY IT. THE INCOME ARISING OUT OF THE SAID UNEXPLAINED INVE STMENT, BEFORE THE INCORPORATION OF COMPANY NEED TO BE TAXE D IN THE HANDS OF THE PROMOTERS, WHO HAPPENED TO BE THE EARL IER PROMOTERS. THUS, BASED ON THE FURTHER FACTS THAT H AVE BEEN BROUGHT ON RECORD, I AM OF THE CONSIDERED OPINION T HAT THE ADDITION OF RS. 2,60,000/- IS NOT SUSTAINABLE IN TH E HANDS OF THE APPELLANT COMPANY AND THIS GROUND OF APPEAL IS TREATED AS ALLOWED. 5.3. WE DO NOT SEE ANY ADDITIONAL EVIDENCE BEING AD MITTED BY THE CIT(A) IN DISPOSING OF THIS ISSUE. ASSESSEE ONLY STA TED THE DATES AND AMOUNTS INVOLVED AND ENTIRE INFORMATION WAS AVAIL ABLE WITH AO CONSEQUENT TO THE SEARCH AND SEIZURE PROCEEDINGS. SINCE THE REVENUE HAS RAISED THE GROUND ONLY ON THE ISSUE OF AD DITIONAL EVIDENCE AND SINCE WE DO NOT FIND ANY ADDITIONAL EVI DENCE BEING TAKEN/ ADMITTED BY THE CIT(A), THERE IS NO MERIT IN TH E REVENUES GROUND. ACCORDINGLY, THE SAME IS REJECTED. I.T.A. NOS. 1515, 1516 & 1517/HYD/14 C.O. NOS. 75, 76 & 77/HYD/14 M/S. JAYCEE SPONGE PROFILES PVT. LTD., :- 6 -: 6. THAT LEAVES US WITH THE MAIN ADDITIONS OF UNSECURED LOANS AND SHARE APPLICATION MONEY BROUGHT TO TAX BY THE AO IN THE ASSESSMENTS, CONSEQUENT TO NON-FURNISHING OF INFORMATI ON BY ASSESSEE. LD. CIT(A) ON THE OBJECTIONS RAISED BY ASS ESSEE, DELETED THE SAME STATING THAT ADDITIONS CANNOT BE MADE IN THE ASS ESSMENT WITHOUT ANY REFERENCE TO SEIZED MATERIAL. IN COMING TO THAT DECISION, LD. CIT(A) RELIED ON THE DECISION OF SPECI AL BENCH OF ITAT IN THE CASE OF ALL CARGO LOGISTICS LTD., VS. DCIT [14 7 TTJ (SB) 513]. REVENUE IS OBJECTING THE SAME AND RAISED THE GROUNDS ACCORDINGLY IN ALL THE IMPUGNED THREE ASSESSMENT YEARS. 7. LD. DR SUBMITTED THAT JURISDICTIONAL HIGH COURT IN TH E CASE OF GOPAL LAL BADRUKA VS. DCIT [346 ITR 106] HAS HEL D THAT THERE IS NO LIMITATION ON POWERS OF AO INSOFAR AS SECTION 153A/ 153C WAS CONCERNED SO AS TO CONFINE HIMSELF ONLY TO THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATIONS AS CONTEMPLATED BY CHAPTER XIV-B. THE HON'BLE HIGH COURT HELD THAT FOR THE PURPO SE OF SECTION 153A AND 153C, AO COULD TAKE INTO CONSIDERATION MATERI AL OTHER THAN WHAT WAS AVAILABLE DURING THE SEARCH AND SEIZURE OPERATION FOR MAKING AN ASSESSMENT OF THE UNDISCLOSED INCOME OF ASSESSEE. HE ALSO RELIED ON THE JUDGMENT OF ALLAHABAD HIGH COUR T IN THE CASE OF CIT VS. RAJKUMAR ARORA [367 ITR 517] (ALLAHABAD) AND JUDGMENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMA R BHATIA [352 ITR 493]. ASSESSEE ALSO RAISED THE CROSS-OBJECTIONS ON THE SAME ISSUE, AS CAN BE SEEN FROM THE GROUNDS. 8. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERUSING THE PROVISIONS OF LAW, WE ARE OF THE OPINION THAT ORDER OF CIT(A) IN DELETING THE ADDITIONS CANNOT BE UPHELD. IT IS TRUE THAT I TAT SPECIAL BENCH IN THE CASE OF ALL CARGO LOGISTICS LTD ., VS. DCIT [147 I.T.A. NOS. 1515, 1516 & 1517/HYD/14 C.O. NOS. 75, 76 & 77/HYD/14 M/S. JAYCEE SPONGE PROFILES PVT. LTD., :- 7 -: TTJ (SB) 513] (SUPRA), HELD THAT IN CASES WHERE ASSES SMENTS ARE NOT ABATED, THE ASSESSMENT U/S. 153A WILL BE MADE ON T HE BASIS OF INCRIMINATING MATERIAL. HOWEVER, THIS OPINION THAT NO T UPHELD BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF GOPAL LAL BADRUKA VS. DCIT [346 ITR 106] (SUPRA) WHICH WAS RENDERED ON 15 -12-2011 MUCH BEFORE THE ORDER OF THE CIT(A). IN FACT, CIT(A) IS BOUND TO FOLLOW THE JURISDICTIONAL HIGH COURT ORDER. NOT ONLY T HE JURISDICTIONAL HIGH COURT, BUT ALSO THE HONBLE ALLAHAB AD HIGH COURT AND DELHI HIGH COURTS (SUPRA) HAVE HELD THAT FOR COMPLETING THE ASSESSMENTS U/S. 153A/153C, AO COULD TAKE INTO CONSIDERATION MATERIAL OTHER THAN WHAT WAS AVAILABLE DU RING THE SEARCH AND SEIZURE OPERATION. IN VIEW OF THIS, WE A RE OF THE OPINION THAT THE ORDER OF CIT(A) CANNOT BE UPHELD. 9. IT IS ONE OF THE CONTENTIONS OF AO THAT ASSESSEE HAS N OT FURNISHED ANY INFORMATION IN THE COURSE OF ASSESSMEN T PROCEEDINGS. THEREFORE, WITHOUT GOING INTO THE MERI TS OF THE ADDITIONS MADE, WE ARE OF THE OPINION THAT THESE ISSUES SHOULD BE RE-EXAMINED BY THE AO BY GIVING PROPER OPPORTUNITY T O ASSESSEE. ASSESSEE ALSO CONTENDED BEFORE LD. CIT(A) THAT DUE O PPORTUNITY WAS NOT GIVEN. IN VIEW OF THIS, WE SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND ALSO ORDER OF THE AO AND RESTORE THE ENTI RE ASSESSMENT TO THE FILE OF AO TO EXAMINE THE ISSUE OF SH ARE APPLICATION MONEY AND UNSECURED LOANS RECEIVED BY AS SESSEE- COMPANY IN THE IMPUGNED ASSESSMENT YEARS AFRESH. NEED LESS TO SAY THAT ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY BY THE AO. IN THE RESULT, REVENUES GROUNDS ON THIS ISSUE ARE CONSI DERED ALLOWED FOR STATISTICAL PURPOSES. I.T.A. NOS. 1515, 1516 & 1517/HYD/14 C.O. NOS. 75, 76 & 77/HYD/14 M/S. JAYCEE SPONGE PROFILES PVT. LTD., :- 8 -: 10. IN THE RESULT, REVENUES APPEAL FOR AY. 2004-05 I S CONSIDERED ALLOWED PARTLY FOR STATISTICAL PURPOSES AND APPEALS IN AYS. 2005-06 & 2006-07 ARE ALLOWED FOR STATISTICAL PURPOSES. ALL TH E THREE CROSS- OBJECTIONS, BEING ON THE SAME ISSUE ARE CONSIDERED A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 09 TH OCTOBER, 2015 SD/- SD/- (P. MADHAVI DEVI) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEM BER HYDERABAD, DATED 09 TH OCTOBER, 2015 TNMM COPY TO : 1. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, 8 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. JAYCEE SPONGE PROFILES PVT. LTD., 21-2-10, URDUGALLI, PATHERGATTI, HYDERABAD. 3. CIT(APPEALS)-VI, HYDERABAD. 4. CIT-(CENTRAL), HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.